WATCHING A TRAIN WRECK, PART 1
Effect Measure suggests that the current NIH problems have arisen because new NIH funds led to more grad students and postdocs, and these people are now applying for grants. Is this right?
First off, did the NIH budget doubling lead to more graduate students? Almost certainly.
Back in the 1970s, when the bottom first fell out of the PhD job market, a number of people were working on complicated models of PhD production to explain what happened. None of them worked very well. Richard Freeman came along and supplied the missing ingredient. Freeman observed that economics predicts that people's decisions to pursue graduate education should be based in part on financial considerations. People weigh their long term prospects as, say, a PhD physicist against alternative possibilities (e.g. investment banker / software engineer / other quantitatively-oriented careers). When prospects are good for physics PhDs relative to the alternatives, more people enroll in physics PhD programs. When prospects are bad (again, relative to the alternatives), fewer people enroll.
Now I'm sure that many people will object, "Money was not a consideration in *my* decision to pursue a PhD! I am doing it for the love of science / truth / rats!" That may be so. Freeman is not suggesting that everyone is motivated primarily by economic considerations -- it's a subtler argument:
Imagine that people's desire to pursue graduate studies lies on a continuum. On one end are people who will pursue a PhD in their chosen field no matter what, even if it leads to a life of miserable penury (the fact that English PhDs continue to be minted is proof that these people exist). On the other end are people who will never ever pursue a PhD under any circumstances. Somewhere in the middle are people who could go one way or the other. It's these people for whom economic considerations hold the most sway. That is not to say that money is a prime motivator even for these folks; rather, there may be stronger motivators pulling in opposite directions, and financial considerations are just the tie-breaker. Regardless, when Freeman included economic considerations into a simple model of physics PhD production, the predictions were spot on. (Here's Freeman's paper)
So do Freeman's ideas continue to have predictive power? The presence of foreign students complicates things (Freeman did his work in the early 70's when there were a lot fewer foreign students), but they are still important.
The NIH budget doubling almost certainly made prospects for PhD life / health scientists look a whole lot brighter. However, we must also consider these prospects relative to alternative choices for prospective life scientists over the doubling period (1998-2003). Given the changes in the 90's in the way health care is paid for, I'd guess that medical school is not as attractive as it once was. And the economy as a whole, particularly the tech sector, underwent a slowdown in 2001. Better prospects for PhD life scientists coupled with worse prospects for alternatives should mean an increase in enrollments. Sure enough, life sciences enrollments started increasing quite rapidly as of 2002.
We can see a similar pattern in the first-year enrollment data below for other S&E fields. For example, in math / CS / engineering / physical sciences, we see a peak in the early 1990s (presumably relating to the NSF's PhD shortage predictions in the late 1980s). There is then a decline (poor job market for PhDs coupled with a tech sector boom), then a rise again as the academic market improved in the late 1990s and the tech sector slowed in 2000-2001.
So getting back to our original question of whether new graduate enrollments have led to the current NIH woes, the answer is clearly "No". It takes 5-7 years to earn a life sciences PhD, and this wave of new students won't even start graduating until next year, let alone writing R01 grants.
Here's the sobering thing, though: Given that concerns about NIH funding levels have only recently hit the press, it's likely that we will see continuing increases in first-year graduate enrollments through at least 2007. This means increasing numbers of new PhDs for another 6-8 years and probably another decade of sizable increases in the ranks of postdocs. A whole crop of new PhDs is walking right into an already troubled labor market, and things probably won't start to improve for 10+ years. Yikes!